The speaker discusses a concept called the rent ratio, which compares the cost of buying a house to the cost of renting. By dividing the home price by the annual cost of renting, a rent ratio is obtained. A high rent ratio, like 20, indicates that it would take a long time to make a decent return on buying a house. The concept is explained using the example of a $500,000 house and a $25,000 annual rental cost. The speaker mentions interviewing Mark Zandy, an economist with expertise in housing.
For many millennials, buying a home has become almost entirely out of reach. Average 30-year mortgage rates are hovering around 7 percent — the highest they’ve been since 2007 — largely because of the Federal Reserve’s efforts to tame inflation.
David Leonhardt, a senior writer for The New York Times, discusses whether it is time to change how we think about buying vs. renting.
Guest: David Leonhardt, a senior writer for The New York Times. He writes The Morning, The Times’s flagship daily newsletter, and also writes for Sunday Review.
Background reading:
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